Reserve Bank should prioritise inflation fight, not shielding jobs, latest poll shows

The central bank’s strategy to protect robust post-pandemic employment growth has put it at the back of the pack in the global battle to reduce price pressures.

Reserve Bank governor Michele Bullock should give greater priority to lowering inflation, Australians believe. Picture: John Appleyard / NewsWire

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Australians want the Reserve Bank to prioritise taming inflation ahead of shielding jobs, as the central bank’s strategy to protect robust post-pandemic employment growth puts it at the back of the pack in the global battle to reduce price pressures.

The Susan McKinnon Foundation’s latest poll, conducted by JWS Research, found 46 per cent of Australians prioritise keeping inflation low, while just 12 per cent view keeping unemployment low as the priority.

Of those aged 25-39, only 9 per cent prioritised keeping unemployment – rather than inflation – low, while 49 per cent prioritised keeping inflation low as opposed to unemployment, the research found.

However, those aged 75 and over were more likely to prioritise keeping unemployment low at 16 per cent, while 35 per cent of this age group gave greater precedence to low inflation.

The survey comes as governments’ cost relief for energy bills and rent caused a sharp, but temporary, fall in annual headline inflation to 2.8 per cent, and with the Albanese government highlighting the addition of one million jobs since it was elected in May 2022.

Former NSW premier and foundation chief executive Mike Baird said the research gave “a pretty strong signal here that the public is more concerned about rising prices than losing their job”.

“While that may change over time, at the moment the public focus is on inflation and the cost of living,” Mr Baird said.

There is considerable conjecture among economists as to whether the RBA has placed too much emphasis on preserving Australia’s still-tight jobs market at the expense of reducing inflation. Under its agreement with the federal government, the RBA has a dual mandate to contain price pressures while also preserving employment.

RBA governor Michele Bullock has repeatedly stressed that the central bank has taken a different route to its peers and is embarking on a “deliberate strategy” of tolerating higher inflation to preserve bumper employment growth, raising interest rates less aggressively than abroad to slow aggregate demand but not enough to result in outright job losses.

Indeed, while the RBA has raised interest rates to 4.35 per cent, interest rates have been more restrictive abroad with central banks in the US, New Zealand, Canada, Britain and Europe all raising their key policy rates to at least 5 per cent.

All five central banks have since moved earlier to cut interest rates while Ms Bullock has ­effectively ruled out a pre-Christmas cut as domestic price pressures, particularly in the labour-intensive services sector, remain sticky.

As a result of the RBA’s approach, Australia’s unemployment rate has risen by a modest 0.6 percentage points from a 50-year low of 3.5 per cent, with record numbers of people in the labour market.

By contrast, New Zealand’s unemployment rate has jumped 1.4 percentage points to 4.6 per cent, Canada’s by 1.7 percentage points to 6.5 per cent. The US ­labour market has broadly tracked in line with Australia with the unemployment rate at 4.1 per cent in both economies.

The McKinnon poll also surveyed Australians’ inflation expectations, with more than half (52 per cent) believing that inflation would still be above the RBA’s 2 to 3 per cent inflation target band in 12 months.

That view broadly aligns with the RBA’s own staff forecasts which predict trimmed mean inflation, will not fall within the RBA’s 2 to 3 per cent target band until the end of 2025.